Solo 401(k)s Take Off

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If you're in a one-person medical practice,you might want to consider a solo401(k) plan for maximum tax and retirementbenefits. With a solo 401(k), you canput away more cash than with just aboutany other retirement plan, basically becauseyou fill the roles of both employerand employee. As an employer, you candefer 20% of your annual income into thesolo 401(k), or 25% if you are incorporated,up to a maximum of $42,000. Asthe employee, you can sock away $14,000plus another $4000 in catch-up contributionsif you're over age 50, for a total of$18,000 more in pretax dollars.As with most retirement savingsplans, 401(k) earnings grow tax-deferreduntil you withdraw them, but the extracash you put in can make a significantdifference in how much you have in yourretirement fund when you leave work. Ifyou invest $40,000 a year over 15 yearsat an 8% average annual yield, you endup with close to $1.2 million to retire on.An extra $18,000 a year going into thekitty, however, will boost your retirementnest egg by more than $527,000. As demand for solo 401(k)plans has grown, administrative expenseshave shrunk. Setup fees now run aslow as $100 and annual managementfees fall in the $50-to-$250 range.